U.S. consumers defied expectations this December by spending generously during the holidays, according to Mastercard retail sales data. Despite persistent concerns about inflation, they purchased books, coats, indulged in luxurious dinners, and booked plane tickets, signaling a robust U.S. economy at year-end.
Holiday Sales Report: Revealing Figures
The report reveals a 3.1% increase in retail sales from November 1 to December 24 compared to the previous year. Online commerce experienced a notable 6.3% increase, surpassing the modest 2.2% uptick in in-person purchases. The fashion sector saw a 2.4% rise, while spending at restaurants increased significantly by 7.8%.
U.S. Consumers Drive Spending Despite Dips in Jewelry and Electronics
Although some categories, such as jewelry and electronics sales, experienced declines of 2% and 0.4%, respectively, an overall vigorous boost in spending by U.S. consumers is evident.
Economic Resilience in 2023
Positive holiday report complements a strong summer and third quarter, defying recession projections, as highlighted by analysts. Record-breaking Black Friday sales, reaching $9.8 billion with a 7.5% increase, and an even more remarkable Cyber Monday, with $12.4 billion according to Adobe Analytics, indicate the country’s economic health.
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Housing Market Strength
Despite Federal Reserve rate hikes, the housing market defied expectations, proving resilient. Mortgage rates above 7% didn’t deter buyers, leading to the S&P CoreLogic Case-Shiller index’s highest 2023 annual increase at 4.8%.
Federal Reserve Perspective
Federal Reserve Chairman Jerome H. Powell expressed cautious optimism in observing the demand and noted that the economy, largely driven by the spending of U.S. consumers, performed outstandingly in 2023.
Rising Prices and Tightened Budgets
Although the results are encouraging, challenges persist for some households, with rising prices of gasoline, groceries, and rent squeezing the budgets of many U.S. consumers. Experts indicate the Federal Reserve closely monitors indicators. These include credit card payment delays and dwindling savings, particularly among younger and lower-credit-score households.
Early Holiday Promotions and Reviving Pre-Pandemic Spending Patterns
In an effort to stimulate spending, retailers advanced their holiday promotions, according to Steve Sadove, senior advisor at Mastercard and former CEO of Saks. This approach provided U.S. consumers with “the best value” and revived pre-pandemic spending patterns.
2024 Outlook: Consideration of Interest Rate Cuts
As 2023 comes to a close, the Federal Reserve is considering cutting interest rates in 2024 to sustain economic expansion. Meanwhile, financial markets are in celebration mode. Dow Jones reaches historic high; S&P 500 nears record, signaling strong confidence in the robust U.S. economy and financial markets. These milestones underscore the confidence in the robust position of the U.S. economy, this is a review of WSJ Print Subscription.